Yahoo's rise in Asia offsets risk from Tumblr bet
Marissa Mayer's acquisition of Tumblr will be a test of her ability to revive Yahoo!
SAN FRANCISCO - Yahoo Inc Chief Executive Marissa Mayer's $1.1 billion acquisition of blogging service Tumblr will be a test of her ability to revive the aging Web portal. Luckily for her, her performance may be graded generously.
Mayer faces plenty of challenges in her efforts to turn six-year-old Tumblr into a money-spinner, not least among them retaining users while devising new types of non-intrusive online ads outside of Yahoo's traditional area of expertise.
And then there is Tumblr's hefty price tag: a sum that equates to a fifth of Yahoo's cash.
But some investors and analysts say that Wall Street is more focused on the rising value of Yahoo's Asian assets, such as its 24-percent slice of China's Alibaba, than on actual business operations. That means the 37-year-old executive faces less immediate pressure to prove that Yahoo's biggest acquisition in years is a profitable one.
"Overall I'm relatively sceptical, but I don't think it matters much to the stock," Macquarie Research analyst Ben Schachter said of the deal.
"Say they destroy 100 percent of the value and drive Tumblr into the ground. It's probably less than a dollar per share in value," he said.
If Mayer's bet delivers, however, some investors say it could provide even more upside to a stock already trading at its highest levels in years.
"The core business is the lottery ticket," said Ryan Jacob, the chief executive of the Jacob Funds, who owns Yahoo shares.
"Investors' expectations for the core business are very low, so if they're able to reinvigorate growth, that will move the needle," said Jacob.
Yahoo's stock finished Monday's regular trading session up 6 cents at $26.58. Its shares have surged roughly 70 percent since Mayer became CEO in July, largely due to stock buybacks and the rising value of its Asian investments, which also include Yahoo Japan.